The housing market slowdown has affected even the hottest markets in the country

California continues to be the most-represented state in the top-20 hottest housing markets, however its markets are most affected by the slowdown

The biggest movers among large metros are affordable markets

February 2019 20 Hottest Markets

The housing market slowdown has penetrated even the nation’s hottest markets. As a group, Realtor.com’s Hottest Markets are seeing inventory sell 3 days more slowly than last February. This increase in days spent on market by the top list hasn’t been seen since December 2014. On the top 20 list, 13 markets are now seeing properties move more slowly than last year. The biggest deceleration was visible in the Californian Markets of Santa Cruz, Sacramento, Modesto, Stockton-Lodi and San Francisco, where time on the market increased by 25, 13, 11, 9, and 8 days, respectively, since last February.

However, the hottest markets continue to receive strong buyer interest relative to other markets. The markets on the list received 1.4 to 2.5 times the number of views per property compared to the national average. In terms of supply, these markets are seeing inventory move 20 to 55 days more quickly than the typical property in the US overall.

Midland, TX, retained its number one spot on the list and both Chico and Yuba City, CA, retained their number 2 and 7 spots from last month. These two markets continue to be supported by a strong inflow of demand from displaced families in the aftermath of November’s Camp Fire.

This month, 9 states were represented in the top 20 list, including Texas, California, Colorado, Washington, New York, Ohio, Indiana, Massachusetts and Idaho. California markets still outnumbered others, with 8 markets making it to the top list. However, the biggest market slowdowns are also occurring within Californian markets.

New to the Top 20 list this month are Santa Cruz, CA; Pueblo, CO; Canton, OH; and Boise City, ID. Although Santa Cruz, Pueblo and Boise have made the list at various times in 2018, this is Canton’s first time in the top 20 since Realtor.com began tracking the metros in 2013. Canton’s views per listing have grown by 42 percent over the past year, more than any other market in the top 20. The number of days a typical property spends on the market in Canton has also decreased by 12 days to 51. This quickening of the pace of sales is also the greatest of any of the top 20 markets on the list.

February 2019 Most Improved Markets

Affordability continues to drive the performance of the most-improved markets overall. Of the largest 40 metros, the most improved metros were Cleveland, OH (+47 spots); Philadelphia, PA (+45 spots); Cincinnati, OH (+43 spots); Charlotte, NC (+28 spots) and Virginia Beach, VA (+17 spots). Four of the five most improved markets have a lower median listing price than the national price of $295,000, the exception being Charlotte, which has a fairly comparable median listing price of $325,000.

On the supply side, the most-improved markets combined are seeing inventory move 5 days faster than this time last year. Virginia Beach, Cincinnati and Cleveland buck the national trend of increasing inventory, as their inventory continues to fall by 6 percent for Virginia Beach and 3 percent for the other two markets. Philadelphia inventory has remained nearly flat, growing slightly by 1 percent. Inventory in Charlotte, however, has grown by 13 percent over the year, higher than the national rate of 6 percent.

On the demand side, buyer interest in these most-improved markets is also rising, with listing views 1.4 times higher than the national average and increasing 22% year-over-year on average.

Realtor.com®’s February data shows the U.S. housing market could be heading into a cooler spring market than last year. Although home prices are increasing, 14 percent of U.S. listings had price cuts in February, and the 51-month trend of declining days on market has reached a tipping point.

Nationally, homes sold in 83 days inFebruary, the same rate as February of last year. This is a notable turning point in a 51-month stretch of declining time spent on the market. Additionally, there are other signs that the housing market is slower this year. The share of homes selling faster than 30 days has declined for the first time since realtor.com began tracking in 2013. This share declined from 28 percent in February 2018 to 27 percent this February. In the 50 largest U.S. metros, the typical home spent an average of three more days on the market in February 2019, compared to the previous year. Seattle, Riverside-San Bernardino and Sacramento saw the largest increases in days on market with properties spending 20, 15 and 13 more days on the market, respectively. On the flip-side, properties in Birmingham, Cleveland and Charlotte sold 15, 6 and 5 days faster than last year, respectively.

Housing inventory continues to increase both locally and at the national level. The national inventory grew by 6 percent year-over-year in February, amounting to approximately 73,000 additional listings, and housing inventory in the 50 largest U.S. metros grew by 11 percent. This is the fifth consecutive month in which inventory has been growing. The large metros which saw the biggest gains in inventory were San Jose, Seattle and San Francisco, growing by 125 percent, 85 percent and 53 percent, respectively.

In February, the share of homes which had their prices cut increased by 2 percent compared to the previous year. This increase was driven by price reductions in the nation’s largest markets. In fact, 39 of the 50 largest markets saw an increase in their share of price reductions compared to last year. Las Vegas saw the greatest increase in price reductions in February, up 19 percent. It was followed by San Jose (+9 percent), Phoenix (+7 percent), San Francisco (+5 percent), and Dallas (+4 percent).

The median U.S. listing price grew 7 percent year-over-year to $294,800 in February, lower than last year’s increase of 10 percent. However, the continuing rise in national median home listing prices in the midst of a market slowdown is likely attributed to inventory growth in the upper tier of the nation’s most expensive markets. The number of homes priced $750,000 and above grew 11 percent over last year, while the number of homes $200,000 and under declined by 7 percent.

Of the 50 largest metros, 35 saw year-over-year gains in median listing prices, but only 11 markets outpaced the national increase of 7 percent. Milwaukee (17 percent increase), Birmingham (14 percent increase), and Rochester (12 percent increase) posted the highest year-over-year median list price growth in February. The steepest median listing prices declines were felt in San Jose, where prices were down 10 percent. Dallas, Austin, and Houston followed with a decline of 4 percent each.

Markets with the Largest Inventory Increases

Metro

Active Listing Count (YoY)

New Listing Count (YoY)

Median Listing Price (YoY)

Price Reduced Share (Y-Y)

Median Days on Market (Y-Y)

San Jose-Sunnyvale-Santa Clara, CA

125%

11%

-10%

8.7%

9

Seattle-Tacoma-Bellevue, WA

85%

-9%

12%

3.8%

20

San Francisco-Oakland-Hayward, CA

53%

-1%

-1%

5.2%

8

San Diego-Carlsbad, CA

39%

-1%

-2%

4.3%

3

Portland-Vancouver-Hillsboro, OR-WA

36%

1%

1%

1.5%

5

Nashville-Davidson–Murfreesboro–Franklin, TN

31%

12%

-3%

1.9%

8

Dallas-Fort Worth-Arlington, TX

28%

3%

-4%

4.4%

8

Los Angeles-Long Beach-Anaheim, CA

26%

-5%

-1%

3.7%

10

Detroit-Warren-Dearborn, MI

22%

11%

8%

0.3%

-1

Boston-Cambridge-Newton, MA-NH

22%

-5%

4%

2.7%

3

Atlanta-Sandy Springs-Roswell, GA

22%

11%

2%

3.1%

2

Tampa-St. Petersburg-Clearwater, FL

20%

7%

1%

2.8%

8

Houston-The Woodlands-Sugar Land, TX

20%

17%

-4%

3.9%

2

Jacksonville, FL

17%

5%

-3%

0.8%

4

Sacramento–Roseville–Arden-Arcade, CA

16%

-18%

2%

0.2%

13

Orlando-Kissimmee-Sanford, FL

16%

10%

0%

3.2%

2

Providence-Warwick, RI-MA

14%

3%

5%

0.0%

-4

Charlotte-Concord-Gastonia, NC-SC

13%

4%

-1%

3.0%

-5

Austin-Round Rock, TX

13%

6%

-4%

2.4%

-1

Riverside-San Bernardino-Ontario, CA

12%

-11%

3%

2.1%

15

Miami-Fort Lauderdale-West Palm Beach, FL

12%

0%

-1%

1.3%

6

Las Vegas-Henderson-Paradise, NV

12%

7%

7%

18.7%

8

New York-Newark-Jersey City, NY-NJ-PA

11%

-6%

7%

1.4%

1

Raleigh, NC

10%

-6%

0%

3.9%

8

San Antonio-New Braunfels, TX

9%

5%

2%

3.0%

-1

Richmond, VA

9%

1%

3%

-0.9%

-1

Buffalo-Cheektowaga-Niagara Falls, NY

8%

-16%

9%

1.8%

2

Phoenix-Mesa-Scottsdale, AZ

8%

1%

2%

6.9%

3

Minneapolis-St. Paul-Bloomington, MN-WI

8%

-19%

0%

1.1%

7

Louisville/Jefferson County, KY-IN

7%

-3%

7%

0.4%

-3

Hartford-West Hartford-East Hartford, CT

5%

-10%

2%

-0.1%

12

Kansas City, MO-KS

5%

-13%

11%

2.0%

12

Columbus, OH

4%

-4%

3%

1.0%

3

Chicago-Naperville-Elgin, IL-IN-WI

2%

7%

3%

1.0%

1

Philadelphia-Camden-Wilmington, PA-NJ-DE-MD

1%

-10%

9%

0.5%

-4

New Orleans-Metairie, LA

1%

0%

3%

1.3%

0

Baltimore-Columbia-Towson, MD

1%

-4%

5%

1.2%

2

Memphis, TN-MS-AR

-1%

-1%

12%

1.6%

-5

Cleveland-Elyria, OH

-3%

3%

10%

-0.2%

-6

Cincinnati, OH-KY-IN

-3%

-7%

7%

-0.7%

-5

Tucson, AZ

-4%

-5%

6%

2.0%

-3

Pittsburgh, PA

-4%

-4%

3%

-0.3%

-4

Virginia Beach-Norfolk-Newport News, VA-NC

-6%

0%

6%

-2.4%

-5

Milwaukee-Waukesha-West Allis, WI

-7%

-16%

17%

-0.9%

-2

Birmingham-Hoover, AL

-7%

3%

14%

1.4%

-15

Rochester, NY

-7%

-6%

12%

-1.2%

-5

Washington-Arlington-Alexandria, DC-VA-MD-WV

-9%

-10%

0%

0.3%

10

Indianapolis-Carmel-Anderson, IN

-10%

-14%

11%

-1.3%

9

Oklahoma City, OK

-11%

-8%

5%

-1.3%

-3

St. Louis, MO-IL

-21%

-18%

7%

1.0%

9

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Realtor.com’s Cross Market Demand Report provides the latest insights on which housing markets receive the most non-local views (inbound traffic), where they come from, and also which non-local markets are of interest to local home shoppers (outbound traffic) based on online traffic on active, for-sale properties on Realtor.com.

Highest Inbound/Outbound Ratio

One way the cross-market demand data can be used is to examine the traffic flowing into an area from elsewhere against the traffic originating in that housing market but shopping for homes elsewhere. We call this the inbound/outbound ratio. A high inbound/outbound ratio as measured by cross-market demand traffic means these markets have more demand flowing inward from other metros compared to demand from local residents looking elsewhere. This shopping data has been correlated with migration patterns and a high inbound/outbound ratio is suggestive of net population growth in a market.

According to Realtor.com traffic data from the fourth quarter of 2018, Spokane, WA; Deltona-Daytona Beach, FL; and Portland, ME had the highest inbound to outbound view ratios, meaning that these markets are attracting outside home shoppers without losing too many local home shoppers. The top 3 remained the same as the previous quarter, and affordability in these markets compared to nearby areas continues to be an attractive feature.

Last quarter we noted three Florida markets made the top 10 list. However, North Port-Sarasota has since fallen out of the top 10 list to number 11. Charleston, SC, also fell to number 15. This quarter, Chattanooga, TN and Greenville, SC, are new entrants on the list. Last quarter they previously held spots 16 and 31, respectively.

This quarter, there are notably two Tennessee markets on the list: Chattanooga and Knoxville. The primary sources of interest flowing to these two markets are coming from Atlanta and Nashville. Combined, views from Atlanta and Nashville are approximately 40% the size of local views to Chattanooga and 30% the size of local views to Knoxville.

Greenville’s rise is largely driven by views from Charlotte, NC, and again, views from Atlanta, GA. Combined, views from Charlotte and Atlanta are approximately 35% the size of local views to Greenville.

Atlanta, Nashville, and Charlotte are some of the biggest economic powerhouses of the Southern region. Although they have until recently been drawing migrants from the North, their rapid growth could have reached a tipping point, spurring locals to explore alternative options in the face of increasing housing costs and commute times.

Rank

Metro

Q4 2017 Inbound/Outbound Ratio

Q4 2018 Inbound/Outbound Ratio

Y-Y Change in Inbound/Outbound Ratio

1

Spokane-Spokane Valley, WA

3.0

2.82

-0.2

2

Portland-South Portland, ME

2.6

2.48

-0.1

3

Deltona-Daytona Beach-Ormond Beach, FL

2.1

2.38

0.2

4

McAllen-Edinburg-Mission, TX

2.0

2.38

0.4

5

Boise City, ID

2.4

2.29

-0.1

6

Chattanooga, TN-GA

2.0

2.24

0.2

7

Knoxville, TN

2.3

2.20

-0.1

8

Palm Bay-Melbourne-Titusville, FL

1.9

2.19

0.3

9

Greenville-Anderson-Mauldin, SC

1.9

2.12

0.2

10

El Paso, TX

1.8

2.11

0.4

Lowest Inbound/Outbound Ratio

On the flip side, we can look at areas with a low inbound/outbound ratio. A low inbound/outbound ratio as measured by cross-market demand traffic means these markets have more demand flowing outward to other metros from local residents compared to demand coming in from residents living elsewhere. Because this shopping data has been correlated with migration patterns, a low inbound/outbound ratio is suggestive of net migration decline in a market. Markets receiving the least inbound demand compared to outbound demand included San Jose and San Francisco, CA; and Washington, DC.

The markets on the list this quarter are unsurprising, as 9 of the 10 are the same as in the third quarter. As we previously noted, a lack of affordable housing inventory in the Californian markets created an outflow of demand to other markets such as Sacramento, Stockton, Santa Cruz, Santa Rosa, and Vallejo, CA. In San Jose and San Francisco, 82.9 percent and 71.2 percent of shoppers are looking outside of their metro, respectively, and these rates have accelerated by 1.7 percent and 1.6 percent over the past year.

Whereas outflowing demand from most of these markets is obviously driven by affordability concerns, Chicago, Atlanta and Detroit stand out, as their median listing prices ($279,050, $311,477, and $220,050, respectively) were either below or near the national median list price of $289,000 at the end of the fourth quarter.

In Chicago, the trend of demand flowing toward more affordable markets held true. Top viewed markets included St. Louis, Indianapolis and Milwaukee, all of which had lower median prices than Chicago itself. Although interest in Chicago from out-of-state markets continued to increase, views from other markets within Illinois decreased significantly. In Rockford, IL, the largest within-state contributor of views to the Chicago metro, within-metro views increased by 11 percent over the year whereas views to Chicago fell by 2 percent. At the end of 2018, the median list price in Rockford was $129,900, significantly less expensive than Chicago’s median list price of $279,000.

In Atlanta, views coming from other metros within the state also decreased, by 21 percent over the year, and views from out of state only grew by 3 percent, whereas views from Atlantans looking to other metros within the state of Georgia and to other states increased by 27 percent and 58 percent, respectively. Top viewed markets include Charlotte, NC; Dallas, TX; and Birmingham, AL.

Charlotte and Dallas have a slightly higher median listing price than Atlanta and similar unemployment rate. Whereas Birmingham is more affordable than Atlanta, its unemployment rate is slightly higher. Although affordability and employment prospects are common drivers of demand, they do not appear to explain Atlanta’s interest in these metros. However, commute times also contribute to the desirability of a location. According to the 2017 census, the share of population facing a commute time of less than 30 minutes is significantly higher in Birmingham (59 percent), Charlotte (60 percent) and Dallas (54 percent), when compared to Atlanta (48 percent). The share of those taking longer than 60 minutes is also lower- 7 percent in Birmingham, 7 percent in Charlotte and 9 percent in Dallas compared to 15 percent in Atlanta.

In Detroit, views from other metros within the state and metros outside of state both declined, by 11 percent and 3 percent, respectively, over the past year. Views from Detroit flowing to other metros within Michigan and to out-of-state metros increased by 23 and 42 percent, respectively. Top metros viewed by Detroit residents included Flint, MI, Columbus, OH and Cleveland, OH.

Both Flint and Cleveland are more affordable, with median prices of $150,000 and $170,000, respectively, in December 2018 compared to Detroit’s $220,000. Columbus was not too far apart in affordability either, with a median listing price of $230,000. Given Flint’s high-profile struggles with water quality, it may come as a surprise that it’s a top destination for Detroit shoppers. However, Flint has since made good progress toward its FAST Start Program, through which it has been steadily replacing its old hazardous pipes. In the second half of 2018, Flint passed an excessive lead test administered by the Michigan Department of Environmental Quality. In the third quarter of 2018, Flint overtook Ann Arbor as the most-viewed Michigan metro by Detroit residents.

Rank

Metro

Q4 2017 Inbound/Outbound Ratio

Q4 2018 Inbound/Outbound Ratio

Y-Y Change in Inbound/Outbound Ratio

1

San Jose-Sunnyvale-Santa Clara, CA

0.2

0.2

0.0

2

San Francisco-Oakland-Hayward, CA

0.2

0.2

0.0

3

Washington-Arlington-Alexandria, DC-VA-MD-WV

0.4

0.3

-0.2

4

New York-Newark-Jersey City, NY-NJ-PA

0.3

0.3

-0.1

5

Chicago-Naperville-Elgin, IL-IN-WI

0.3

0.3

0.0

6

Seattle-Tacoma-Bellevue, WA

0.5

0.3

-0.2

7

Atlanta-Sandy Springs-Roswell, GA

0.5

0.3

-0.2

8

Los Angeles-Long Beach-Anaheim, CA

0.5

0.4

-0.2

9

Salt Lake City, UT

0.5

0.4

-0.2

10

Detroit-Warren-Dearborn, MI

0.6

0.4

-0.2

Biggest Movers

With a high inbound/outbound ratio signaling strong external interest in a market, relative to the desire of locals to look elsewhere, an improvement in the inbound/outbound ratio can signal a potential shift in the attractiveness of a local area’s real estate market and suggests that migration trends could improve as well. Markets which have seen the most improvement in their inbound to outbound ratio include Toledo, OH; McAllen-Edinburg-Mission, TX and Albuquerque, NM.

All of the metros in this top 10 list have seen the share of residents shopping for homes outside the local market shrink over the past year, dropping by 5.7 percent on average. Out of state interest in these markets has also increased, usually outpacing growth in demand flowing from within the state or within the local market. In 8 of the 10 markets, views flowing in from out of state grew faster than views from within other markets within the state and views from local markets.

Affordability is a strong driver in this list, in which eight out of the top 10 markets had a median listing price lower than the national median of $289,000 at the end of the fourth quarter of 2018. Additionally, all of the metros were more affordable than the top external markets viewing them. This includes Riverside-San Bernardino, CA and Worcester, MA which have a lower median listing price than Los Angeles and Boston, their respective top viewers, but a higher listing price than the national median.

Toledo, OH, this quarter’s most improved market, had 16.4 percent and 15.3 percent of its out-of-metro views come from nearby Detroit and Cincinnati, respectively. Columbus, OH, although a large market, has strong local demand and its residents prefer to look for properties either outside of the state or within Columbus itself. Columbus accounts for just 5.1% of Toledo’s external demand.

McAllen, TX demand is largely driven by larger more expensive Texas metros, such as Houston (20.7 percent of external demand), San Antonio (14.4 percent) and Dallas (10.0 percent). This contrasts with El Paso, which has also made the top 10 list and has the majority of its demand coming in from other metros and other states. In particular, Las Vegas is the primary contributor of out-of-metro demand to El Paso. The interest began in the third quarter of 2017, when Las Vegas jumped from outside the top 10 to 2nd place after Dallas and has since overtaken Dallas.

Albuquerque, NM demand is largely driven by out-of-state markets such as Denver, Los Angeles and New York. Although out of state, Albuquerque is only a seven hour drive from Denver, where median home prices are 80 percent more expensive and residents could view Albuquerque as a viable alternative.

Rank

Metro

Q4 2017 Inbound/Outbound Ratio

Q4 2018 Inbound/Outbound Ratio

Y-Y Change in Inbound/Outbound Ratio

1

Toledo, OH

0.9

1.3

0.5

2

McAllen-Edinburg-Mission, TX

2.0

2.4

0.4

3

Albuquerque, NM

0.8

1.2

0.4

4

Scranton–Wilkes-Barre–Hazleton, PA

1.1

1.5

0.4

5

Riverside-San Bernardino-Ontario, CA

0.9

1.3

0.4

6

El Paso, TX

1.8

2.1

0.4

7

Augusta-Richmond County, GA-SC

1.7

2.0

0.4

8

Worcester, MA-CT

0.8

1.1

0.3

9

Memphis, TN-MS-AR

1.0

1.3

0.3

10

Palm Bay-Melbourne-Titusville, FL

1.9

2.2

0.3

For a full breakdown of how housing views are flowing between markets, our Cross Market Demand dashboards are available here.

Methodology

Realtor.com analyzed views to Realtor.com listings spanning the 100 largest metropolitan areas in the fourth quarter of 2018, compared to the fourth quarter of 2017. Views to these 100 metros included views from smaller metro areas however it is worth nothing that this data was not adjusted to account for Realtor.com’s listing view market share in a metro.

The analysis primarily focuses on a metro’s inbound to outbound ratio, which is the ratio of views to that metro from other metros, compared to views from that metro flowing to other metros.

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In November 2018, Millennials finally overtook Generation X as having the largest share of loan originations by dollar volume. They had previously overtaken Generation X as having the largest share of counts in January 2017.

However Millennials still make lower down payments and purchase less expensive homes than Gen X and Baby Boomers.

Due to lower down payments, Millennials now take on larger mortgages overall than Baby Boomers, further adding to their debt load.

Millennials prefer markets which are more affordable, whereas Boomers are less concerned with affordability and strongly prefer markets in low-tax states.

In January 2017, Millennials overtook Generation X as the generational group taking on the most new mortgages. Since then, their share has continued to rise. At the end of 2018, Millennials took on 45 percent of all new mortgages, compared to 36 percent for Generation X, and 17 percent for Baby Boomers.

However, due to purchasing less expensive homes, the Millennial share of total loan volume had not caught up to Generation X until very recently, in November 2018. Millennials now also account for the largest share of loan volume, with a share of 42 percent in December, compared to a share of 40 percent for Generation X and 17 percent for Baby Boomers.

As Millennials are primarily demanding starter homes, their median purchase price is still lower than the other two generations. At the end of 2018, the median price of a mortgaged home purchased by Millennials was $238,000, compared to $264,000 for Baby Boomers and $289,000 for Generation X, who are in their prime income-earning years.

Nonetheless, Millennials are growing up and increasing their purchase price at a faster rate than the other two generations. The median price of a mortgaged home purchased by Millennials rose by 4.8 percent over the past year, compared to 3.7 percent for Generation X and 3.5 percent for Baby Boomers. This rate of growth has been consistently higher since May 2014, as Millennials begin to bridge the gap in purchase prices. However, the rate of growth has been decreasing from its peak of 9.2 percent in March 2015. If this deceleration continues, it could be an indicator of Millennials getting close to an age and life stage-appropriate ‘ceiling’ price.

Millennials also still tend to make lower down payments, which averaged 8.8 percent in December 2018 compared to 11.9 percent for Generation X and 17.7% for the more equity-rich Baby Boomers. Unlike the rate of growth in purchasing prices, the yearly change in down payments provided by Millennials has been lower than the older generational groups since October 2015. At the end of 2018, Millennials had increased their down payments by only 59 basis points over the year, compared to 77 for Generation X and 120 for Baby Boomers.

The lack of substantial increases in down payment shares coupled with quickly growing purchase prices indicates that Millennials are taking on larger mortgages. Indeed, this is evident in the median loan amount data, where, despite purchasing less expensive homes, Millennials overtook Boomers in median mortgage amount in October 2017.

Top Markets by Generation

We ranked housing markets by a generational ‘score’ which is a composite of their rankings by the current share of mortgages issued to each generation and the change in that generation’s share of the market from last year.

Top Millennial Markets

The top Millennial markets are more affordable on average, having an Affordability Score of 0.96 on average compared to 0.83 for the nation overall at the end of 2018. They are also far more affordable for the 25 to 34 year old age group, with an Affordability Score of 0.94 for this age group compared to 0.80 nationally. The costs to purchase a home in these markets are on average only 25 percent of their median income, compared to 31 percent nationally.

In general, Millennials also have more earning power in these markets, with the 25 to 34 year old age group earning a median income of $63,000 in these markets compared to $61,000 nationally. Six of the 10 markets have a higher median income for this age group than the national figure, however the remaining four are within $5,000 of the national amount.

Top Gen X Markets

The top Gen X markets are a mix of secondary home markets and strong-employment markets. Five of the markets on the list have unemployment rates higher than the national rate of 3.7 percent (Las Vegas, Los Angeles, Rochester, Bridgeport and Providence), and 5 markets are below this rate (Dallas, Atlanta, Washington DC, Tampa and Jacksonville). Jacksonville, Tampa and Las Vegas rank fairly high in share of secondary home mortgage originations.

These markets are less affordable on average, having an Affordability Score of 0.71 compared to 0.83 for the nation overall. The cost to purchase a home in these markets is on average 38 percent of their median income, compared to 31 percent nationally. However, median incomes in these markets average $68,000, surpassing the national median of $61,000 and the Millennial-preferred market average of $63,000.

Top Boomer Markets

This past year, Boomers were predominantly attracted to lower-tax markets, desiring to preserve the wealth they’ve earned over the course of their working years. The average total state tax burden in the top 10 Boomer markets (including property tax, individual income tax, and total sales and excise tax) was only 7.9 percent, compared to an average of 8.8 percent for all 100 metros that were analyzed. Tennessee, Florida and Texas have no income tax and Oklahoma has a low overall tax burden. These states are well-represented in the top 10 list. Aside from the two Californian markets, which are more affordable alternative markets for Californians living in expensive metros, the other markets on this list are also located in states with relatively lower tax burdens. In fact, we found a strong and statistically significant correlation between a market’s ‘Baby Boomer score’ and its tax burden. This relationship was non-existent for Millennials and Generation X.

The top Boomer markets are also slightly more affordable than top Gen X markets, as the below list has an average Affordability Score of 0.74 compared to 0.71 for Gen X-preferred markets. The cost to purchase a home in these markets is on average 34 percent of the local market’s median income, compared to 31 percent nationally and 38 percent for the hottest Gen X markets. Median incomes in these markets average $61,000, similar to the national median of $61,000 but lower than both the median incomes in Millennial and Gen X-preferred markets.

California is most-represented state in the top-20 hottest housing markets, however its historically dominant markets have continued to slip down the list

Midland, TX has surpassed Chico, CA to once again reclaim the number one spot on the list

The biggest movers among large metros are affordable markets

In January, the cooling of housing market conditions experienced nationally has also resulted in the cooling of some of the nation’s hottest markets. This month’s list includes markets which are genuinely still accelerating and but it also includes relatively hot but decelerating housing markets which are now seeing inventory growth and a deceleration in price growth and days spent on market compared to their heydays.

Realtor.com’s Hottest Markets received 1.4 to 2.4 times the number of views per property compared to the national average. In terms of supply, these markets are seeing inventory move 14 to 55 days more quickly than the typical property in the US overall.

However, given the recent slowdown in the housing market, even several of the nation’s hottest local markets are not seeing inventory move more quickly than the previous year. As a result, the group on average has seen inventory movement stall, with properties moving no more quickly than last January. This deceleration in days spent on market hasn’t been seen since Fall 2016 for our Top 20 markets. On the top 20 list, 11 markets are still seeing properties move more quickly than last year, but 8 are seeing properties move more slowly. The biggest deceleration was visible in the Californian markets of Vallejo, San Francisco, and Sacramento, where time spent on the market increased by 17, 15 and 10 days, respectively, compared to last January.

After Chico’s surge from 16th place to the number one spot last month due to strong demand from displaced families in the aftermath of the Camp Fire, it has now settled at number two. Midland, TX once again takes the number one spot as the hottest housing market.

This month, 11 states were represented including Texas, California, Indiana, Colorado, Ohio, Washington, New York, Wisconsin, Massachusetts, Michigan, and Kentucky. California markets still outnumbered others, with 8 markets making it to the top list. However, Californian markets which have historically dominated the list, like San Francisco, San Jose, Vallejo, and Stockton-Lodi have again either disappeared from the list or decreased in ranking over the previous year. Big movers in California included the smaller and more affordable markets of Yuba City and Chico, both of which are currently tight markets driven by strong demand from displaced victims of the Camp Fire. Yuba City and Chico moved up the ranking by 24 and 12 spots, respectively.

New to the Top 20 list this month are Rochester, NY; Fresno, CA; Milwaukee, WI; and Spokane, WA. In January, Rochester and Milwaukee were identified as two of the few larger markets seeing year over year list price growth outpace the national rate, growing by 18 percent and 16 percent, respectively, compared to the 7 percent national rate. Spokane had previously made the top 20 list 6 times in 2018. However its current ranking as 9th hottest market is the highest it has ever scored. We have repeatedly identified Spokane as a market to watch in our Cross Market Demand Series, noting its rising external interest from the more expensive Seattle metro area. Fresno is another market which we have identified as receiving strong inbound demand compared to outbound interest leaving the area, particularly from more expensive Californian markets.

January 2019 Most Improved Markets

Affordability was again a big factor in the most-improved markets overall. Of the largest 40 metros, the most improved metros were Cleveland, OH (+54 spots); Cincinnati, OH (+47 spots); Milwaukee, WI (+38 spots); Philadelphia, PA (+34 spots) and Charlotte, NC (+31 spots). Four of the five most improved markets have a lower median listing price than the national price of $289,300, the exception being Charlotte, which has a fairly comparable median listing price of $320,000.

On the supply side, the most-improved markets combined are seeing inventory move 8 days faster than this time last year. Additionally, year over year inventory growth is down or essentially flat in four markets, a trend which diverges from the national inventory gain of 5 percent. The outlier of the group is again Charlotte, which has seen inventory grow by 14 percent since last January.

On the demand side, buyer interest in these most-improved markets is also rising, with listing views 1.6 times higher than the national average and increasing 30% year-over-year on average.

January Top 20 Hottest Housing Markets

Metro

Rank

Rank YY

Median Days on Market

Days on Market YY

Views Per Property YY

Median Listing Price

Listing Price YY

Midland, TX

1

3

49

-4

4%

$349,975

9%

Chico, CA

2

12

33

-28

35%

$344,000

21%

San Francisco-Oakland-Hayward, CA

3

-2

50

15

-17%

$837,475

-1%

Fort Wayne, IN

4

17

67

-6

36%

$183,450

8%

Colorado Springs, CO

5

0

63

9

-1%

$377,422

-4%

Sacramento–Roseville–Arden-Arcade, CA

6

2

64

10

6%

$449,500

2%

Yuba City, CA

7

24

67

-8

44%

$302,450

0%

Columbus, OH

8

8

69

0

2%

$229,900

4%

Spokane-Spokane Valley, WA

9

21

68

-4

37%

$300,000

14%

Odessa, TX

10

17

63

-5

24%

$267,500

28%

Dallas-Fort Worth-Arlington, TX

11

1

67

5

2%

$329,995

-4%

Vallejo-Fairfield, CA

12

-9

61

17

-13%

$449,675

-1%

Rochester, NY

13

10

72

4

37%

$189,225

18%

Stockton-Lodi, CA

14

-4

61

7

-4%

$396,000

2%

Modesto, CA

15

-4

57

-1

-3%

$344,900

-1%

Milwaukee-Waukesha-West Allis, WI

16

38

69

-11

25%

$249,700

16%

Fresno, CA

17

-2

63

2

2%

$299,950

0%

Boston-Cambridge-Newton, MA-NH

18

4

74

-1

24%

$502,522

2%

Detroit-Warren-Dearborn, MI

19

0

66

-3

2%

$219,900

10%

Louisville/Jefferson County, KY-IN

20

20

69

-6

29%

$239,900

6%

January’s Most-Improved Major Housing Markets

Metro

Rank

Rank YY

Median Days on Market

Days on Market YY

Views Per Property YY

Median Listing Price

Listing Price YY

Cleveland-Elyria, OH

52

54

82

-9

38%

$169,950

6%

Cincinnati, OH-KY-IN

44

47

73

-7

37%

$231,250

6%

Milwaukee-Waukesha-West Allis, WI

16

38

69

-11

25%

$249,700

16%

Philadelphia-Camden-Wilmington, PA-NJ-DE-MD

68

34

83

-5

29%

$249,945

9%

Charlotte-Concord-Gastonia, NC-SC

38

31

76

-7

20%

$319,975

-2%

Methodology: Listing views per property indicate relative demand while median days on market indicate relative supply. Top markets are those with strong relative demand and limited relative supply.

The monthly mortgage payment for the U.S. median home was $1,578 in the fourth quarter of 2018, compared to the average monthly rent of $1,267

Top areas where buying is more affordable than renting include: Clayton County, Ga. (Atlanta); Delaware County, Ind. (Muncie); and Baltimore City, Md.; Richmond County, Ga. (Augusta); and Madison County, Ind. (Indianapolis).

On average, buying the median home accounts for 31 percent of the national median income, while renting accounts for 25 percent

Fifty-one U.S. counties analyzed switched from being more affordable to buy to more affordable to rent in the last quarter of 2018

At the end of the fourth quarter of 2018, the monthly costs to buy the national median priced home was $1,578 or 31 percent of the national median income. This is slightly more than the budgeting rule of thumb of spending no more than 30 percent of gross income on housing costs. The monthly cost to buy is up 13 percent from the same time last year when it was $1,398 and 29 percent of income. Meanwhile, the cost to rent increased only 4 percent from $1,216 to $1,267, which represents a negligible change in the share of income required of 25 percent.

Of larger counties with populations over 100,000, the monthly costs of buying a home being are cheaper than renting in 17 percent of counties, down from 25 percent last year. Over this time period, 51 larger counties swapped from being more affordable to buy to being more affordable to rent. The largest counties to swap over the past year include Philadelphia County, PA (Philadelphia Metro Area); Bronx County, NY (New York Metro Area); Cuyahoga County, OH (Cleveland-Elyria Metro Area); Milwaukee County, WI (Milwaukee Metro Area); and Shelby County, TN (Memphis Metro Area).

The cost to purchase a home is still affordable (less than 30 percent of income) in 60 percent of larger counties, compared to 62 percent last year. However, as the inventory of homes available for sale in high cost areas has been increasing, the resulting increase to the national median listing price has nudged the cost to buy as a share of income from 29 percent to 31 percent over the past year.

Pockets of affordability persist, but they are getting harder to find. Many parts of U.S. have seen relative home-buying affordability erode away, thanks to rising home prices and interest rates, and slower rising rents. Still, while the short-term math may be challenging, in the long term, rising rents tend to eventually outpace the cost of principal and interest on a fixed rate loan, which can make a home purchase the better long-term decision. Rising home prices, which benefit owners, can tip the scales further in favor of buying and help explain why many renters want to own a home even if it is increasingly challenging to get into the housing market.

Where is purchasing a home favored?

In the 10 larger counties below, the difference between the share of income to buy a home and rent a home most strongly favored buying at the end of the fourth quarter. Median listing prices in these counties were on average 60 percent lower than the national median listing price of $289,000, while median rents, although still less expensive, were only 19 percent cheaper on average.

Clayton County, GA (Atlanta Metro Area); Richmond County, GA (Augusta Metro Area), Madison County, IN (Indianapolis Metro Area); and Muscogee County, GA (Columbus Metro Area) all saw flat or declining median listing prices over the past year, and the three Georgia metros all saw rental prices increase by 4 to 5 percent. Conversely, Delaware County, IN (Muncie Metro Area); Baltimore City, MD; Vigo County, IN (Terre Haute Metro Area); and Wayne County, MI (Detroit Metro Area); all saw listing price increases which outpaced the national rate of 7 percent and will likely see the gap between renting and borrowing narrow in the near future.

Rank

County

Percent of Income to Buy

Percent of Income to Rent

1

Clayton County, GA

17%

32%

2

Delaware County, IN

12%

23%

3

Baltimore City, MD

26%

36%

4

Richmond County, GA

17%

26%

5

Madison County, IN

11%

20%

6

Vigo County, IN

15%

24%

7

Schuylkill County, PA

11%

19%

8

Wayne County, MI

19%

27%

9

Cumberland County, NJ

20%

28%

10

Muscogee County, GA

20%

28%

Where is renting a home favored?

In the 10 larger counties below, the difference between the cost to buy a home and rent a home most strongly favored renting at the end of the fourth quarter. Median listing prices in these counties were on average 280 percent higher than the national median of $289,000, and median rents, while also more expensive, were only 90 percent more expensive on average. However, six of these counties saw flat or declining listing prices over the past year. New York County, NY (New York Metro Area); Marin County, CA (San Francisco Metro Area); and San Mateo County, CA (San Francisco Metro Area); saw the greatest declines in listing prices of this set of 10 counties, as prices declined by 22 percent, 11 percent and 9 percent, respectively. Although marginal improvements to affordability are expected to coincide with this decline in prices, the change is not expected to significantly change their standings on this list as large gaps between the costs to purchase or rent a home will still persist.

Rank

County

Percent of Income to Buy

Percent of Income to Rent

1

New York County, NY

126%

30%

2

Kings County, NY

96%

44%

3

Monterey County, CA

79%

30%

4

Santa Cruz County, CA

82%

34%

5

Santa Barbara County, CA

79%

32%

6

San Mateo County, CA

81%

37%

7

San Francisco County, CA

80%

41%

8

Napa County, CA

65%

26%

9

Marin County, CA

75%

38%

10

Maui County, HI

67%

31%

Where has the gap between renting and buying a home changed the most?

Over the past year, many counties have seen the difference between the cost to purchase a home compared to the cost to rent a home erode toward favoring renting a home. Primarily due to increasing home prices, increasing interest rates, and stable or falling rents, the following five counties have seen the gap between renting and buying increase the most over the past year:

Rank

County

Median Listing Price

Median Listing Price Y/Y

Interest Rate 2018

Interest Rate 2017

Median Rent

Median Rent Y/Y

Percent of Income to Buy

Percent of Income to Rent

1

Ector County, TX

$270,050

32%

4.8%

3.9%

$1,257

-18%

30%

23%

2

Midland County, TX

$356,550

15%

4.8%

3.9%

$1,434

-17%

33%

29%

3

Bronx County, NY

$415,050

17%

4.8%

4.0%

$2,086

9%

70%

61%

4

Alamance County, NC

$245,050

16%

4.7%

3.9%

$872

-11%

34%

28%

5

Essex County, NJ

$389,950

16%

4.7%

3.9%

$1,504

2%

53%

45%

Notes on Methodology

Purchase and rent costs reflect current costs and do not take into account holding period, price and rent appreciation, and inflation. Purchase costs do include taxes and insurance, and are calculated based on realtor.com county-level residential listing price data and mortgage rate data for December 2018. Rental prices are from the U.S. Department of Housing and Urban Development (HUD) data for 2018 50th-percentile rent estimates. Household income data and home-ownership data is from Census Housing Vacancies and Home-ownership data and 2018 Nielsen estimates based on Census data. Only counties with populations of 100,000 or greater are included in the top lists in this analysis.

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Only six months following the most competitive home buying season of all time, January data shows the U.S. housing market is off to a slower start in 2019. Although home prices are increasing, 15 percent of U.S. listings had price cuts in January, and declines in days on market have significantly decelerated since last year.

The U.S. housing market is off to a slower start this year in many markets, compared to the rapid acceleration we saw last January. Although the market is slowing, it’s important to remember that we’re coming off of four straight years of inventory declines that pushed the market to a record low availability of homes for sale. The real metric to keep an eye on is entry-level homes, which are the key to getting today’s market back in balance. These homes are still in short-supply.

Sellers are making price cuts, especially in the sunshine states

In January, the share of homes which had their prices cut increased by 2 percent compared to the previous year. This increase was driven by price reductions in the nation’s largest markets. In fact, 39 of the 50 largest markets saw an increase in their share of price reductions compared to last year. Las Vegas saw the greatest increase in price reductions in January, up 16 percent. It was followed by San Jose (+9 percent), Seattle (+8 percent), Orlando (+6 percent), and Phoenix (+5 percent).

Time on market increases across America’s largest metros

Nationally, homes sold in 87 days in January, two days faster than last year. But the rate of this decline is decelerating. In January 2018, homes sold a full week faster compared to the previous year. In the 50 largest U.S. metros, the typical home spent an average of one more day on the market in January 2019, compared to the previous year. San Jose, Calif., Seattle and San Francisco saw the largest increases in days on market with properties spending 27, 19 and 15 more days on the market, respectively. On the flipside, properties in Birmingham, Ala., Milwaukee and Cleveland sold 14, 11 and 9 days faster than last year, respectively.

Inventory increases in expensive markets keep home prices high

The median U.S. listing price grew 7 percent year-over-year to $289,300 in January, slightly lower than last year’s increase of 8 percent. This moderate deceleration in home prices is likely attributed to inventory growth in the upper tier of the nation’s most expensive markets. The number of homes priced $750,000 and above grew 12 percent over last year, while the number of homes $200,000 and under declined by 6 percent.

Of the 50 largest metros, 32 saw year-over-year gains in median listing prices, but only 12 markets outpaced the national increase of 7 percent. Rochester, N.Y. (18 percent increase), Milwaukee (16 percent increase), and Seattle (12 percent increase) posted the highest year-over-year median list price growth in January. The steepest median listing prices declines were felt in San Jose, Calif., where prices were down 9 percent, or $100,000. Dallas, Texas; Austin, Houston, and Nashville, Tenn., followed with a decline of 4 percent in Dallas and Austin and 3 percent in Houston and Nashville.

Markets with the Largest Inventory Increases

Metro

Median Listing Price

Median Listing Price (YoY)

Inventory (YOY)

New Listing Inventory (YOY)

Share of price reductions (Y-Y)

Median Days on Market (Y-Y)

San Jose-Sunnyvale-Santa Clara, Calif.

$999,494

-9%

128%

29%

9%

27

Seattle-Tacoma-Bellevue, Wash.

$561,543

12%

91%

14%

8%

19

San Francisco-Oakland-Hayward, Calif.

$837,525

-1%

58%

16%

4%

15

San Diego-Carlsbad, Calif.

$650,050

-1%

46%

17%

3%

5

Los Angeles-Long Beach-Anaheim, Calif.

$699,950

-1%

36%

9%

5%

10

Nashville-Davidson–Murfreesboro–Franklin, Tenn.

$349,950

-3%

36%

29%

4%

5

Portland-Vancouver-Hillsboro, Ore.-Wash.

$459,950

0%

34%

22%

3%

9

Sacramento–Roseville–Arden-Arcade, Calif.

$449,550

2%

28%

-3%

0%

10

Boston-Cambridge-Newton, Mass.-N.H.

$502,572

2%

27%

28%

3%

-1

Dallas-Fort Worth-Arlington, Texas

$330,045

-4%

25%

13%

4%

5

Atlanta-Sandy Springs-Roswell, Ga.

$309,900

3%

22%

27%

5%

-2

Detroit-Warren-Dearborn, Mich.

$219,950

10%

21%

18%

2%

-3

Tampa-St. Petersburg-Clearwater, Fla.

$259,975

0%

21%

11%

3%

4

Riverside-San Bernardino-Ontario, Calif.

$389,500

3%

18%

-2%

3%

8

Houston-The Woodlands-Sugar Land, Texas

$308,050

-3%

18%

14%

2%

1

Jacksonville, Fla.

$299,050

-3%

18%

23%

3%

4

Providence-Warwick, R.I.-Mass.

$339,950

3%

16%

17%

2%

-8

Orlando-Kissimmee-Sanford, Fla.

$299,050

0%

15%

11%

6%

1

Minneapolis-St. Paul-Bloomington, Minn.-Wis.

$352,500

1%

14%

10%

4%

-1

New York-Newark-Jersey City, N.Y.-N.J.-Pa.

$515,050

9%

14%

17%

1%

-2

Charlotte-Concord-Gastonia, N.C.-S.C.

$320,025

-2%

14%

24%

4%

-7

Austin-Round Rock, Texas

$346,934

-4%

12%

17%

0%

2

Raleigh, N.C.

$339,050

0%

12%

21%

4%

3

Miami-Fort Lauderdale-West Palm Beach, Fla.

$385,050

-1%

12%

4%

1%

5

Richmond, Va.

$300,025

3%

9%

9%

2%

-5

San Antonio-New Braunfels, Texas

$285,000

2%

9%

20%

3%

-1

Louisville/Jefferson County, Ky.-Ind.

$239,950

6%

9%

13%

1%

-6

Hartford-West Hartford-East Hartford, Conn.

$259,950

0%

8%

-1%

-1%

7

Buffalo-Cheektowaga-Niagara Falls, N.Y.

$174,950

9%

7%

11%

3%

-2

Las Vegas-Henderson-Paradise, Nev.

$314,994

8%

7%

27%

16%

2

Columbus, Ohio

$229,950

4%

6%

14%

2%

0

Kansas City, Mo.-Kan.

$287,050

11%

6%

2%

3%

5

Chicago-Naperville-Elgin, Ill.-Ind.-Wis.

$279,950

3%

5%

4%

1%

-2

Phoenix-Mesa-Scottsdale, Ariz.

$335,050

2%

4%

2%

5%

-2

Baltimore-Columbia-Towson, Md.

$296,523

4%

4%

1%

2%

-1

Cincinnati, Ohio-Ky.-Ind.

$231,300

5%

2%

3%

1%

-7

Virginia Beach-Norfolk-Newport News, Va.-N.C.

$280,025

4%

1%

14%

0%

-8

Philadelphia-Camden-Wilmington, Pa.-N.J.-Del.-Md.

$249,995

9%

0%

7%

0%

-5

New Orleans-Metairie, La.

$270,275

0%

0%

18%

3%

2

Cleveland-Elyria, Ohio

$170,000

6%

-1%

5%

1%

-9

Memphis, Tenn.-Ms.-Ark.

$204,838

9%

-3%

18%

1%

-6

Washington-Arlington-Alexandria, D.C.-Va.-Md.-W.V.

$419,000

1%

-4%

-7%

1%

2

Pittsburgh, Pa.

$169,950

0%

-4%

9%

0%

-5

St. Louis, Mo.-Ill.

$198,073

7%

-5%

-9%

0%

6

Milwaukee-Waukesha-West Allis, Wis.

$249,750

16%

-6%

8%

0%

-11

Rochester, N.Y.

$189,275

18%

-6%

6%

0%

4

Indianapolis-Carmel-Anderson, Ind.

$239,150

9%

-7%

9%

5%

1

Birmingham-Hoover, Ala.

$219,845

11%

-9%

16%

0%

-14

Tucson, Ariz.

$280,000

6%

-9%

-5%

3%

-2

Oklahoma City, Okla.

$235,000

4%

-11%

-7%

0%

-1

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Overall, affordability declined at the national level from December 2017 to December 2018

Despite the national decline, 22 of the 100 largest metros in the country have seen improved affordability

Affordability in these metros is spurred by inventory increases in the fall and winter of 2018

The Realtor® Affordability Distribution Curve and Score is NAR and realtor.com®’s ongoing research designed to examine affordability conditions at different income percentiles for all active inventory on the market. The Affordability Distribution Curve examines how many listings are affordable to those in a particular income percentile and the Affordability Distribution Score summarizes the distribution curve into one single measurement, which can be used to understand overall affordability trends over time.

At the end of the fourth quarter of 2018, 69 out of the nation’s 100 largest metros became less affordable compared to the same time period in the previous year, whereas 9 were unchanged and 22 became more affordable. Nationwide, households earning $35,000, which represent the 30th percentile of households, have seen the share of active listing inventory that is affordable to them decrease from 20.5% to 17.2% over the past year, and households earning $75,000, which represent the 60th percentile of households, have seen the share of inventory that is affordable to them decrease from 54.1% to 50.1%.

Figure 1: Affordability in the Top 100 Metros (Hover over markets to see distribution curve)

﻿﻿

The Most Affordable and Least Affordable Markets

The Distribution Score summarizes affordability across income levels. Metro areas that have a high distribution score are more affordable across a broader range of income levels. Conversely, metros with a low distribution score are less affordable across a range of income levels. Nationally, the country’s Distribution Score decreased from 0.87 last December to 0.83 this year. The top most affordable and unaffordable metros are ranked below. Metros in the Midwest and upper Northeast are the most affordable overall, while the least affordable metros are mostly in California.

Top 5 Most Affordable Metros by Distribution Score

Youngstown-Warren et al, OH-PA – 1.21

Dayton, OH – 1.18

Akron, OH – 1.17

Toledo, OH – 1.16

St. Louis, MO-IL – 1.10

Top 5 Least Affordable Metros by Distribution Score

Los Angeles-Long Beach et al, CA – 0.37

San Diego-Carlsbad, CA – 0.38

Oxnard-Thousand Oaks-Ventura, CA – 0.46

San Jose-Sunnyvale et al, CA – 0.51

Urban Honolulu, HI – 0.51

Inventory Continues to Play a Big Role in Improved Markets

Affordability conditions aren’t static and change as incomes in a market change or as home inventory increases or decreases at certain price points. The metro markets with the biggest gains in affordability over the last year were again generally less affordable areas in the West. This fall, we reported that the metros of Austin, Oxnard-Thousand Oaks, Nashville, San Jose and Portland saw the biggest improvements in affordability. The same metros remain on this winter’s list of most-improved areas. Although San Jose and Oxnard-Thousand Oaks still remain on the least affordable metros list, their affordability has improved over the past year. As we reported earlier this fall, rising inventory has led to some slow improvements to affordability conditions in these markets which is registering in their Affordability Scores.

Top Affordable Markets by Income Level

Affordability conditions are different within a market for households at different income levels. The affordability curve enables us to look at how these conditions vary for households. Unsurprisingly, Midwestern markets top the list for affordability for households at both the $35,000 and $75,000 income levels. California markets are generally unaffordable for households earning $35,000 and also offer few affordable options for households earning $75,000.

Top Affordable Markets for Households Earning $35,000

Youngstown-Warren et al, OH-PA – 54.7% of market is affordable

Toledo, OH – 48.9% of market is affordable

Dayton, OH – 46.6% of market is affordable

Akron, OH – 44.7% of market is affordable

Scranton-Wilkes-Barre et al, PA – 39.5% of market is affordable

Least Affordable Markets for Households Earning $35,000

Oxnard-Thousand Oaks-Ventura, CA – 0.0% of market is affordable

San Jose-Sunnyvale et al, CA – 0.0% of market is affordable

San Francisco-Oakland et al, CA – 0.1% of market is affordable

Los Angeles-Long Beach et al, CA – 0.2% of market is affordable

Austin-Round Rock, TX – 0.3% of market is affordable

Top Affordable Markets for Households Earning $75,000

Youngstown-Warren et al, OH-PA – 85.9% of market is affordable

Dayton, OH – 82.1% of market is affordable

Toledo, OH – 80.1% of market is affordable

El Paso, TX – 78.1% of market is affordable

Akron, OH – 77.1% of market is affordable

Least Affordable Markets for Households Earning $75,000

San Jose-Sunnyvale et al, CA – 0.4% of market is affordable

San Francisco-Oakland et al, CA – 2.8% of market is affordable

Oxnard-Thousand Oaks-Ventura, CA – 3.4% of market is affordable

San Diego-Carlsbad, CA – 5.2% of market is affordable

Los Angeles-Long Beach et al, CA – 6.9% of market is affordable

Methodology

The REALTORS® Affordability Distribution Curve and Score is a monthly NAR and realtor.com® data series designed to examine affordability conditions at different income percentiles for all active inventory on the market. The Affordability Distribution Curve examines how many listings are affordable to those in a particular income percentile. The Affordability Score varies between zero and two and is a calculation that is equal to twice the area below the Affordability Distribution Curve on a graph. A score of one or higher generally suggests a market where homes for sale are more affordable to households in proportion to their income distribution.

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For-sale homes in 40 percent of large markets experience a longer time on market

Median listing price in December was $289,000

The U.S. housing market showed continuing signs of cooling in many of the nation’s largest metros in December. The largest markets saw a 10 percent increase in inventory, compared to a nationwide average of 5 percent, as time on market decelerated, listing price growth slowed and price cuts increased.

Homes sold at a pace of 80 days in December, three days faster than last year. However, this rate is decelerating, as December 2017 saw homes sell six days faster compared to the previous year. On average, typical properties on the list of 45 top metros spent the same amount of time on the market as the previous year, while 19 markets saw the typical property actually spend more time on the market than last year. Properties in San Jose, Calif., Seattle and Nashville, Tenn., typically spent 14, 10 and six more days on the market this December, respectively. On the flip-side, properties sold more quickly than last year in Birmingham, Ala., Milwaukee and Richmond, Va. at 12, 11 and 10 days, respectively.

Sellers are adjusting their strategies, especially in slowing, pricey markets with growing availability of homes for sale. Although buyers may not find a bargain, the price discounts and recently lower borrowing costs may entice upper-tier buyers back into the market. By contrast, entry-level shoppers continue to contend with declining availability of homes for purchase, albeit at a slower rate.

Nationally, the percentage of listings that saw price reductions increased to 15 percent in December, up from 13 percent a year ago. The increase is being driven by the nation’s largest markets. In fact, 38 of the 45 top markets saw an increase in the share of price reductions. Charlotte, N.C., topped the list with the share of price reductions growing by 10 percent, from 14 percent last year to 24 percent in December. It was followed by San Jose (+10 percent), Tampa (+9 percent), Phoenix (+9 percent) and Seattle (+8 percent).

The median U.S. listing price grew 7 percent year-over-year to $289,000 in December, lower than last year’s increase of 8 percent. Of the 45 top metros reviewed, 32 still saw year-over-year gains in their median listing price, but only 11 markets outpaced the national growth rate of 7 percent. Milwaukee (+14 percent), Indianapolis (+12 percent), and Kansas City, Mo. (+12 percent) are some of the larger markets that posted the highest year-over-year median list price growth.

The steepest declines in median listing prices were felt in San Jose, Calif., and San Francisco, which were down 12 percent and 4 percent, or $130,000 and $33,000, respectively. Austin, Tex., Houston, Dallas, Nashville, Tenn., Charlotte, N.C., and Jacksonville, Fla. also saw declines. However, selling prices in some of these markets are not yet reflecting these declines.

According to Realtor.com mortgage origination data from the third quarter of 2018, Millennial purchasers continued to take market share away from Generation X and Baby Boomers, with their share of originations rising to 45.2 percent at the end of the quarter, compared to 38.9 percent for Generation X and 14.4 percent for Baby Boomers. The Millennial generation’s share of mortgages grew by 3.2 percent, almost entirely accounting for the 1.8 percent and 1.6 percent decline in the Generation X and Baby Boomer share, respectively.

As millennials are more budget constrained than older generations and many are only starting to establish their households, it’s no surprise that this group prefers more affordable markets. The top millennial markets are generally more affordable than the typical market in the largest 60 metros, with 9 of 10 markets having a higher affordability score than the US. The only exception being Salt Lake City, Utah, which has an attractively low unemployment rate.

Out of the top 10 markets, 7 also have an unemployment rate lower than the US overall. Of the exceptions, Pittsburgh and Cincinnati’s unemployment rates are very close to the national rate. Only Buffalo stands apart as having significantly higher unemployment but this factor is mitigated by its relative affordability.

Rank

Metro

Unemployment

Affordability Score

Millennial Share Q3 2017

Millennial Share Q3 2018

YY Change

1

Buffalo-Cheektowaga-Niagara Falls, NY

4.8%

0.91

48.5%

61.2%

12.7%

2

Pittsburgh, PA

4.1%

1.07

44.9%

52.1%

7.3%

3

Milwaukee-Waukesha-West Allis, WI

3.2%

0.86

44.3%

52.0%

7.7%

4

Grand Rapids-Wyoming, MI

3.2%

0.83

50.7%

51.4%

0.7%

5

Cincinnati, OH-KY-IN

3.9%

0.92

48.2%

51.4%

3.3%

6

Omaha-Council Bluffs, NE-IA

2.9%

0.82

44.8%

51.3%

6.5%

7

Salt Lake City, UT

2.3%

0.69

48.9%

50.6%

1.8%

8

Columbus, OH

3.8%

0.95

46.6%

50.5%

4.0%

9

Oklahoma City, OK

3.5%

0.91

45.3%

49.2%

3.8%

10

Minneapolis-St. Paul-Bloomington, MN-WI

2.7%

0.83

45.7%

49.1%

3.5%

Becoming More Millennial

The top Millennial market, Buffalo, NY, is also the market which has seen the greatest growth in the share of Millennial mortgage originations over the past year, growing by an astounding 12.7 percent from 48.5 percent in of 2017 to 61.2 percent in 2018. Millennials are flocking to Buffalo, where the local economy has seen a huge turn-around since the recession, unemployment has been declining, and incomes have been rising. In Buffalo, the average salary stretches further and its close-knit-community feel is attractive to young adults looking to start families and achieve a work-life balance which is difficult in large urban centers.

Other increasingly Millennial metros include affordable areas such as Milwaukee, WI; and Pittsburgh, PA; both of which made the top 10 list overall and all of which have higher affordability scores than the US overall. The one exception is San Jose, which is one of the most expensive metros in the country but which remains appealing due to its strong job prospects in the tech industry.

Rank

Metro

Unemployment

Affordability Score

Millennial Share Q3 2017

Millennial Share Q3 2018

YY

1

Buffalo-Cheektowaga-Niagara Falls, NY

4.79

0.91

48.5%

61.2%

12.7%

2

Milwaukee-Waukesha-West Allis, WI

3.15

0.86

44.3%

52.0%

7.7%

3

Pittsburgh, PA

4.09

1.07

44.9%

52.1%

7.3%

4

San Jose-Sunnyvale-Santa Clara, CA

2.67

0.45

37.3%

44.3%

7.0%

5

Omaha-Council Bluffs, NE-IA

2.94

0.82

44.8%

51.3%

6.5%

For more insights on generational trends in the housing market, click here.

Data Sources

The Report on Loan Originations by Age and Generational Groups is based off of a Realtor.com analysis of a sample of residential mortgage loan originations from Optimal Blue.

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